We've Got Hollywood Covered

Writers Guild to AT&T: If We Strike, Shareholders Will Suffer

”A writers’ strike could undermine AT&T’s primary reason for acquiring Time Warner,“ WGA says in letter

The Writers Guild of America West has sent AT&T and Time Warner Cable shareholders a letter, warning them of the impact a strike could have on both earnings and the pending merger between the two.

“A writer’s strike could undermine AT&T’s primary reason for acquiring Time Warner, which is ownership of compelling content,” WGA West director David Young wrote in the letter sent on Thursday, obtained by TheWrap. “A strike could also delay any potential shareholder benefits from the acquisition.”

The letter opens with the WGA explaining that a work stoppage will commence on May 2 should no agreement between the WGA and the Alliance of Motion Picture and Television Producers (AMPTP), which represents the entertainment industry’s employers, be reached.

“Should this occur, writing for television, feature films and digital series will cease,” Young wrote. “This will include all writing on live-action feature films and television series made by Time Warner production entities. Time Warner employs approximately 1,000 Guild writers annually. In television, WGA members write and produce 725 episodes of television for more than 50 Time Warner-owner scripted series each year. WGA members are the creators of Time Warner’s top television brands including ‘The Big Bang Theory,’ ‘Game of Thrones’ and ‘Westworld.'”

The letter added, “Late night shows made for Time Warner networks including ‘Conan,’ ‘Full Frontal with Samantha Bee,’ ‘Real Time with Bill Maher’ and ‘Last Week Tonight’ will go off the air immediately.”

And not only could the strike affect the fall television season, but it could also delay any potential shareholder benefits from AT&T’s acquisition of Time Warner.

AT&T agreed to acquire Time Warner in October in an $85 billion deal that would combine assets including the Warner Bros. studio, CNN, HBO, DirecTV and AT&T Wireless in one massive conglomerate and make AT&T CEO Randall Stephenson one of the most powerful men in Hollywood.

The deal was set to create a distribution and content colossus of the digital age, bringing together premium assets including satellite TV provider DirecTV, cell phone network AT&T Wireless, the Warner Bros. movie and television studios and HBO and Turner cable channels under one, massive corporate roof.

“AT&T has promised that the merger will generate returns for shareholders within a year, stating, ‘The transaction will be accretive to its adjusted earnings per share and accretive to its free cash flow within 12 months after the completion of the transaction.’ Further, as AT&T continues to increase its indebtedness, a strike that reduces Time Warner revenue and profits could affect cash flow and the ability to pay dividends.”

The guild, whose contract expires May 1, had been negotiating a new contract for film and TV writers with the AMPTP, but those talks broke down toward the end of last month. The WGA’s negotiating committee called for a strike authorization vote March 24.

The two sides will reconvene at the negotiating table during the week beginning April 10, but the guild has already made contingency plans in the event that it can’t reach a deal with the producers’ alliance. Los Angeles member meetings are set for April 18 and 19, while a New York meeting will also take place on April 19. An online strike authorization vote will begin April 19 at 8:30 p.m. PT through April 24 at noon PT.

The letter to the shareholders also asserts the impact the rapid growth of international demand for content and digital syndication created by SVOD players like Netflix, Amazon and Hulu has on the TV industry.

“While Time Warner has enjoyed the success of the television business, writers’ income has declined sharply in the last five years,” Young wrote. “The average pay of writer-producers working in television declined 23% over the last two years alone. The decline is driven by the growth of short order series with 13 or fewer episodes. Writers, who are primarily paid by the number of episodes produced, often work just as many weeks on short order series as they did on traditional 22-episode series but are paid for fewer episodes. Writer-producers are the only employees on a television production who do not receive additional pay for additional time worked.”

The letter says that the WGA proposal would cost Time Warner just $27.4 million over three years, which pales in comparison to the advertising revenue and carriage fees the network would get from airing these shows.

“Should a WGA strike occur, Time Warner would have to modify the foregoing representations,” the letter concluded. “A strike of the writers who create the programming that fuels both Time Warner’s film, studio and network segments has the potential to materially affect Time Warner’s revenue.”

It continued, “We ask you to contact AT&T and Time Warner management to urge the company to negotiate a fair deal that avoids a strike.”

The AMPTP declined to comment. Representatives for AT&T and Time Warner could not be reached for comment.